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Habit Restaurants Inc (HABT): Are Hedge Funds Right About This Stock?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Habit Restaurants Inc (NASDAQ:HABT).

Most Expensive New York Restaurants

Habit Restaurants Inc (NASDAQ:HABT) has experienced a decrease in activity from the world’s largest hedge funds of late. HABT was in 9 hedge funds’ portfolio at the end of September. There were 11 hedge funds in our database with HABT holdings at the end of the previous quarter.

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According to most shareholders, hedge funds are perceived as slow, old investment vehicles of years past. While there are over 8000 funds trading at present, Experts at hedge fund tracking site Insider Monkey look at the elite of this group, around 700 funds. It is estimated that this group of investors orchestrate most of the hedge fund industry’s total capital, and by keeping track of their first-class investments, Insider Monkey has deciphered various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, let’s take a look at the latest action regarding Habit Restaurants Inc (NASDAQ:HABT).

Hedge fund activity in Habit Restaurants Inc (NASDAQ:HABT)

At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably.

According to hedge fund experts at Insider Monkey, Lomas Capital Management, managed by Daniel Lascano, holds the most valuable position in Habit Restaurants Inc (NASDAQ:HABT). Lomas Capital Management has a $16.1 million position in the stock, comprising 2.8% of its 13F portfolio. On Lomas Capital Management’s heels is Citadel Investment Group, managed by Ken Griffin, which held a $5.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds with similar optimism consist of Clifford Fox’s Columbus Circle Investors, John Tompkins’s Tyvor Capital and Israel Englander’s Millennium Management.

Since Habit Restaurants Inc (NASDAQ:HABT) has experienced falling interest from the smart money, logic holds that there was a specific group of hedge funds who were dropping their full holdings last quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising about $0.7 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s also take a look at hedge fund activity in other stocks similar to Habit Restaurants Inc (NASDAQ:HABT). We will take a look at American Residential Properties Inc (NYSE:ARPI), TrustCo Bank Corp NY (NASDAQ:TRST), Air Transport Services Group Inc. (NASDAQ:ATSG), and Sapiens International Corporation N.V. (NASDAQ:SPNS). This group of stocks’ market values are similar to HABT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARPI 11 145048 -4
TRST 8 60752 4
ATSG 19 196825 -3
SPNS 10 27572 4

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. Habit Restaurants is less popular among the funds we track than many of these stocks and it registered a decline in sentiment during the third quarter, which might suggest that the stock is losing its appeal. Anyway, this metric is not 100% accurate and a further analysis is required, but the hedge fund sentiment could significantly narrow down your search.

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